SB 151 An Act providing for oil and gas exploration incentive credits for certain activities on certain land in the state; and providing for an effective date. HCS CS SB 151 (FIN) was reported out of Committee with a "do pass" recommendation and with zero fiscal notes by the Department of Revenue dated 3/07/94 and the Department of Natural Resources dated 2/02/94. SENATE BILL 151 "An Act providing for oil and gas exploration incentive credits for certain activities on certain land in the state; and providing for an effective date." KEN BOYD, DEPUTY DIRECTOR, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES, stated that the Exploration Incentive Credit (EIC) bill would extend the program that already exists on State lands to all lands in the State. It would provide a means for the State to obtain exploration data to which it would not normally be entitled and would encourage exploration on lands that would enhance the exploration of adjacent or nearby State lands. He added that the EIC's are currently offered by the State as a means to encourage exploration on State lands. Under AS 38.05.180(i), the Commissioner of Natural Resources may authorize the use of incentive credits to encourage exploration of state leases through either geophysical work or the drilling of a well. Geophysical EIC's could be earned if the work was performed during the two seasons immediately preceding an announced lease sale on land included within the sale area, and if the geophysical work was made public following the sale. He added that drilling EIC's are based on the footage drilled and the region in which the well is situated. Mr. Boyd noted that Governor Hickel's proposal would be to expand the current EIC program to all areas of the State, with certain modifications and restrictions. The new 3 legislation would provide $50 million dollars that could be used over a period of ten years, with each individual project capped at $5 million dollars. Credits of up to 50 percent on state-owned land and 25 percent on non state owned land would be allowed. Mr. Boyd continued that the new legislation would also provide for credits to be applied against income and other taxes in addition to the severance tax. The credits would remain transferable under the provisions of the bill, and as with the current plan, amounts due the Permanent Fund must be calculated prior to application of any credits. Discussion followed between Representative Brown and Mr. Boyd regarding the program changes in the legislation. Mr. Boyd explained that any amount of financial obligation due would be transferred to the Permanent Fund first and then the credit would be determined from that remaining amount. Representative Brown MOVED to adopt Amendment #1. [Copy on file]. Mr. Boyd advised that the amendment would clarify the Department's intent and that the Department would support it. There being NO OBJECTION, Amendment #1 was adopted. Representative Brown MOVED to adopt Amendment #2 which would make the requirement to adopt regulations mandatory instead of discretionary. [Copy on file]. Mr. Boyd agreed that it was the intent of the Department to adopt regulations and that the Department would support the amendment. There being NO OBJECTION, Amendment #2 was adopted. Representative Brown MOVED to adopt Amendment #3 which would determine the total credit which the Commissioner of DNR could offer. [Copy on file]. Representative Brown summarized that the credit would include "all" credits to "all" companies. The amendment would delete "$50 million dollars" and then insert "$30 million dollars". Mr. Boyd agreed that $30 million dollars would be a sufficient and reasonable amount. (Tape Change, HFC 94-140, Side 2). Representative Martin OBJECTED to Amendment #3. A roll call vote was taken on the MOTION. IN FAVOR: Parnell, Therriault, Brown, Grussendorf, Hanley, Hoffman. OPPOSED: Foster, Martin, Navarre, Larson. Representative MacLean was not present for the vote. 4 The MOTION PASSED (6-4). Representative Brown offered a language change to Amendment award" to Page 3, Line 14. The concept of the amendment would be to discontinue the credits to companies who owed a debt to the State. Representative Brown MOVED to adopt the amended Amendment #4. Representative Hanley questioned the definition of "debt" in the amendment. Mr. Boyd agreed the amendment would be a policy call of the Legislature and that it would be difficult to determine a "debt". LARRY MEYERS, DIRECTOR, INCOME AND EXCISE AUDIT DIVISION, DEPARTMENT OF REVENUE, advised that the application of Amendment #4 would reference an outstanding unpaid assessment. Representative Brown WITHDREW Amendment #4. There being NO OBJECTION, it was withdrawn. Representative Navarre MOVED to report HCS CS SB 151 (FIN) out of Committee with individual recommendations and with the accompanying zero fiscal notes. There being NO OBJECTION, it was so ordered. HCS CS SB 151 (FIN) was reported out of Committee with a "do pass" recommendation and with zero fiscal notes by the Department of Natural Resources dated 2/02/94 and the Department of Revenue dated 3/07/94.